Posted by: Chris Palmeri on January 2, 2009

Economists at Wells Fargo predict the economy will improve by the second half of 2009.

“The ongoing impact of $2 trillion in government stimulus, with other factors such as pent-up consumer demand and returning consumer confidence, will finally lead to a turnaround, and the third quarter of next year will be “better than expected” by many,” says Dr. Jim Paulsen, chief investment strategist of Wells Capital Management. “It’s like you’re at a cookout and you’re trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes ‘poof!’”

Dr. Scott Anderson, senior economist for Wells Fargo & Company, predicted that the housing sector will lead the way. “One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out,” Anderson said.

Dr. Eugenio Aleman, senior economist for Wells Fargo & Company, said he was most concerned that the injecting of hundreds of billions of dollars into the economy through the financial sector – is not helping those who need it most.

“Current monetary policy will help only those households that do not need help – those that have plenty of money and have a stable job,” he said. “They will refinance, buy homes and consume. It will not help those who are struggling to make ends meet, or have lost their jobs or may soon lose them, because no financial institution is going to lend them money to buy a home, no matter what the interest rate is.” He said it is up to the new administration to help these households through fiscal policy, with government spending that will create jobs.

The current job market is one of the worst in decades, with another 3.7 million jobs expected to be lost this year. That means that job losses in this recession will total 5.5 million, twice as many as were lost in the 1981-1982 recession, the second worst since World War II. The unemployment rate will rise to 8.8 percent by the end of 2009, Wells Fargo predict and will average 8.2 percent for the year. Gross domestic product will decline in the first two quarters before expansion resumes in the third quarter.

Economist Paulsen blamed “fear mongering” by government officials to persuade Congress to pass the $700 billion Troubled Asset Relief Program in the fall for the depth of our problems today. That, he said, “froze everyone in their tracks” and resulted in “economic paralysis.”

Anderson said the U.S. government will provide the primary support for the economy in 2009. This will come in a stimulus package from the new administration with infrastructure spending and middle-class tax cuts, plus “natural stabilizers” such as unemployment benefits, food stamps and other welfare payments. The infrastructure spending will be too narrow to help everyone, he said – but the middle-class tax cuts will offer more sustained consumer spending than recent one-time stimulus checks. Savings rates may also rise to 5 percent.

Reader Comments

Ballbuster

January 3, 2009 3:02 AM

Those who refer to themselves as "Dr" this and "Dr" that, as well as BW editors who bestow the title "Dr" to their sources in their blogs, should make a one-way trip to see Dr Kervorkian. There is no connection between truth and the person possessing the title,"Dr." Remember Dr. Mengels(sic) of the Nazi? With the average American consumer underwater in credit card debt, upside-down mortgage, and shaky employment, how can he manage a 5 percent savings rate? Even in the best of times, he has managed only slightly above 2%. Palmeri is hallucinating or just plain talking nonsense. Obviously, his over reliance on using the fancy "Dr" title exposes his attempt to impart some credibility to his dung masqueraded as blog.

Dan

January 4, 2009 4:37 PM

LOL. These guys didn't see anything coming. What makes anyone think these guys know anything about where we're going to be in 6 months or 12 months?

Chris

January 6, 2009 10:38 PM

I love guys who dismiss article writers because it doesn't fit their doom and gloom scenario. I'd ask Ballbuster where he got his doctorate in economics from?

Josh

January 9, 2009 10:22 PM

Hey bro lemme get some of what your smoking...u r a moron

Gordon Parshall

January 12, 2009 1:19 AM

I used to think that Greenspan was a genius. Not anymore! Here's a great idea-- let's lower the prime lending rate. If this doesn't fix the economy, lower it again...

RST1967

January 26, 2009 4:38 PM

I'll take any good news out there that brings hope! It's a good thing we don't have to back the "green backs" with gold. Keep printing and circulating those green backs until we pull out of this nose dive. Failure is not an option!

fred

February 8, 2009 11:58 AM

On 12/31/07, "Dr" Paulsen and his crack team at Wells Fargo said: "The fallout from the housing slump and the so-called “credit crunch” will prove less severe than many fear" and Paulsen said he was optimistic about the U.S. economy.

Paulsen is like Abby Cohen - a perma-bull who sees only the positive, and will cherry pick any data to support his view.

I blame everyone except myself, and I know everything

March 1, 2009 11:12 AM

Many economists knew the downturn was on its way. But no one wants to take preventive action while they are making money. Who wants to ruin the party with sobering news when you're lying around a camp fire with a good beer buzz going?. Regardless of what we are doing reality is going to strike sooner or later. Now that all hell broke loose and the party is over, we're all alert and taking action on matters that should of been taken care of when the economy was good. Yes the current situation is bad, but the governments have taken the proper corrective action.

As to the issue dems vs republicans stimulus, its all political bullshit. Both want to control and run the country. If the republicans were in power the stimulus package would not be any smaller or much different. The republicans are up in arms over the stimulus because if the economy recovers under democratic leadership, the democrats will be seen as saviours of the economy, and everyone will praise Obama. Thats the last thing republicans want. If the republicans were in power democrats would would be crying about spending and deficits created by the Bush Legacy.

So in summary, I say we were all asleep at the wheel when times were good. Although we knew a storm was on the way no one wanted to be the nerd at the party with bad news. We are all alert now and taking proper action. Give it time. Lastly Politics is politics either party would of passed a similar stimulus bill, its just a matter of who looks more responsible and who can take credit for the recovery. Democrats or Republicans.

Oh one last bit about the good party, I believe us the general public were taking on too much debt?. So we can blame the banks all we want for lending it (and they should be held responsible) but really its our fault for taking on more then we can afford. Why save for a rainy day when times are good: Vacations, homes, cars, boats, motorcycles, anything else on that can fit on my Visa or line of credit? So our lavish overspending and lack of saving is same as these guys on wall street not taking preventive action knowing bad times are coming.

So the shit hit the ceiling fan, its done, we're cleaning it. It will take some time but its getting done.

Have a nice day!

BS61

April 10, 2009 10:26 AM

Good for Well's Fargo being a good bank. But all of the Nobel Laureate economists say that we will be in this recession for 3-5 years, so what makes them think it will end in months?!! Are they nuts? And nobody addressed the inflation that will happen when we print money at will. Lordy, get real.

Johnn

April 10, 2009 11:34 AM

I am sorry I dont think so that this ression will end in 2009

Johnn

April 10, 2009 11:34 AM

I am sorry I dont think so that this ression will end in 2009

Justin Baumgartner

May 5, 2009 6:56 PM

Bernanke says the recession will end in the summer of 09.

sunil

May 20, 2009 6:03 AM

these Economists talk bullshit

zaffar kazimi

August 10, 2009 6:26 AM

MY PERSONAL REQUEST TO ENTIRE WORLD HEAD OF THE COUNTRIES SPECIALLY TO GOVT OF INDIA .PLEASE TAKE IMMEDIATE ACTION ON BELOW MENTIONED POINTS.
1.BRING ALL THE BLACK MONEY FROM SWISS BANK.
2.TAKE IMMEDIATE ACTION ON POLITICIAN ON THEIR ILLEGAL ASSETS.
3.TAKE ACTION ON BIG BUSINESS HOUSES AND ON THERE TAX DOCUMENTS.
4.STOP BLACK MARKETING OF ESSENTIAL COMMODITIES.IT SHOULD BE ON TOP PRIORITY
5.PEOPLES TO GOVT CONTACTS.

zaffar kazimi

August 11, 2009 10:44 AM

MY ADVICE TO INDIAN GOVT;;;;;;

HOW TO BOOST INDIAN ECONOMIC WITH HELP OF PEOPLES AND FOR THE DEVELOPEMENT OF COUNTRY,AND OF COURSE IT WILL FOR PEOPLES,
THE WORKING SYSTEMS OF THE ALL THE MINISTRY ARE VERY OLD STYLE.IT SHOULD BE ON THE STYLE OF PRESENT SITUATION.

THE FINANACE MINISTRY HAS TO CHANGE ITS TAX COLLECTION SYSTEMS . i.e. LESSS DOCUMENTATION AND EASY TO PAY THE TAX.....HOW ....FIRST STOP LIMIT OF DEPOSIT IN THE BANK, ANY AMMOUNT INDIAN AND FOREIGN CITIZEN CAN DEPOSIT...BUT
THERE WILL BE ONE COLUME ON THE RIGHT SIDE OF BANK STATEMENT OF TAX DEDUCTION OF EACH AND EVERY TRANSACTION.AND MONTHLY AND YEARLY TOTAL SIDE BY SIDE AND THIS MANDATARY TO EVERY ACCOUNT HOLDERS....LAST YEARLY PAYMENT ON THE RIGHT COLUME IS YOU TAX PAYABLE TO YOUR COUNTRY.
THIS WILL BOOST ECONOMY AS WELL AS TAX PAYER numbers will increase.

advice to govt of india

zach

August 25, 2009 2:08 AM

Recession ending in the Summer of 09?? Not a chance. Try 2011 or 12 my friends. If that! It's good to be optimistic but this recession sucks and were just getting started

Smart Women

November 22, 2009 4:33 PM

We all must look like fools to the rest of the world, this is no recession (government & economist just doesn't want to admit it)...IT'S THE 2ND GREAT DEPRESSION!!! We are no where close to pulling out of this mess and it will be a long time before we are. We know that the safeguards set up after the depression were underfunded, thus the return of another depression. The US is in more debt than ever before. Hopefully, if the great citizens of our country wake up and take notice, we should be wise enough to never let this happen again. Too may voters sit back idlly, and allow the politicians to keep on taking over OUR country. It's our great country and it's supposed to be run by the people and for the people. So why isn't it? Most politicians and the wealthy are not suffering, just the hard working citizens that help produce all the products and services that make the rich, even richer during these times. How come the majority of the citizens are either loosing their jobs, taking pay cuts and/or loosing company benefits? Are those that own these companies putting less in their pockets/cutting their salaries? Are the politicians cutting their payhecks, expense accounts or benefits? Why should our elderly and disabled citizens have to put more of their fixed income into health insurance costs, expenses, and medications? How are they expected to survive through this? Rising costs in health insurance and decreasing health insurance benefits, why should that be happening at all. If anything, it should be the reverse, why treat our elderly and disabled as if they should be punished. They've paid into the system for years and most usually tried to save for that rainy day. Their savings have been depleted by deceptive investors and rising medical costs, and now their government is taking even more from them. The first thing that needs to be done is quality health care at a cost all can afford and without taxing it. Politics answer to everything is to spend money our country no longer has and then to increase taxation even more to make up for their spending spree. Correct me if I'm wrong, but wasn't America founded on the premise to relieve the citizens from the great tax burden that was being imposed upon them. Well, that relief from taxation didn't last long. What's wrong with this scenerio.......can anyone tell me? Why can't the government that we elect and pay their salaries and benefits be honest with it's citizens, so that we can be part of the solution and not just dictated to. What's happening to our democracy.....too many polticians and not enough listening to the voters and what their wants and needs are! PLEASE STOP SUGAR COATING IT, AS JUST ANOTHER RECESSION. We need to face the facts and fix it before it's too late.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.